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NEW DELHI: Kingfisher Airlines surged nearly 5 per cent in early trade on Tuesday and is now locked in upper circuit, after a newspaper reported that Abu Dhabi's carrier Etihad Airways is set to buy a 48 per cent stake in the troubled airliner.

The Mumbai Mirror report, citing unnamed sources in the two airlines, said an official announcement was expected around December 18, the birthday of Kingfisher's flamboyant boss Vijay Mallya. The deal is worth more than 30 billion rupees ($553 million), the newspaper said.

Kingfisher shares were up 4.96 percent and are locked in upper circuit at Rs 15.67 rupees in morning trading on the Bombay Stock Exchange.

Mallya has been desperately seeking a buyer from abroad to save his airline from collapse since the government in September allowed foreign airlines to purchase stakes of up to 49 percent in domestic carriers.

The debt-ridden airline, named after Mallya's biggest beer brand, has been struggling to survive, owing billions of dollars in taxes and payments to suppliers, lenders and employees.

The carrier's staff ended a strike in late October over unpaid wages but Kingfisher's fleet has remained grounded after India's airline industry regulator suspended its licence.

The watchdog has said it will not lift the suspension until Kingfisher comes up with a "viable" revival plan.

Etihad, which carried 8.3 million passengers in 2011, already holds stakes in Virgin Australia, Air Berlin, Air Seychelles and Aer Lingus.

It has also reportedly been looking at buying a stake in India's Jet Airways.

The Mumbai Mirror said Etihad would buy the Kingfisher stake in two installments: 30 percent this month and another 18 percent by August next year, after cracking the deal last week in Abu Dhabi.